It’s likely unsurprising that retail companies don’t do all that well during a recession. People are trying to save money, after all. So, it means far less shopping, as well as shopping at stores with lower prices. Yet that’s exactly why I’m considering this retail stock.
Value and quality combined
When it comes to investing in a retail stock, you need to think outside the box during a recession. That box usually tends to travel towards companies that offer cheaper products. And fair enough! There are certainly companies that will do well during a recession that offer lower-cost items.
The problem is, everyone flocks to them during a recession and then fade away from them afterwards. You don’t want to see a drop; you want a steady incline! That is why I would recommend retail stock Canadian Tire (TSX:CTC.A) instead.
Canadian Tire stock is a retail stock that offers lower cost items but also quality products. This comes from creating partnerships with major brand names as well as creating its own products that it can then sell at a lower price.
Furthermore, other companies need to pay far more for shipping on a regular basis. That’s because Canadian Tire stock is able to store its products on the premises, thanks to massive warehouses on location. This was a major benefit during the pandemic, when e-commerce soared.
Now, these are great reasons to invest in this retail stock to begin with. However, Canadian Tire stock also offers substantial growth thanks to its expansion in recent years. This included e-commerce. But it also includes expansion through bringing some major Canadian brands, such as SportsChek and Mark’s Work Warehouse under its umbrella.
Then there are two other sources of revenue. The oil and gas part of its industry is thriving as never before. Further, there’s its Triangle Rewards program, which has given rise to use of the loyalty program, especially when used in combination with its credit card program and used at certain gas stations.
Value is the reason Canadians come to Canadian Tire stock, but they stay from loyalty. You collect those points and get hooked, coming back again and again to earn.
Yet it’s so cheap!
Despite all these facts, Canadian Tire stock remains so cheap! It currently trades at just 9.39 times earnings, with shares down 12% in the last year alone. That means you can bring in a 4.2% dividend yield as of writing, which comes out as $6.90 annually.
Right now, you can look forward to earnings that continue to outpace estimates, growth through its many programs, and value in terms of offerings and share price. Canadian Tire stock is also just not going anywhere. That makes it a great time to pick this up as a long-term investment.
In fact, in the last decade alone, shares are up 133%! Buy this retail stock now and you’ll get quick returns and perhaps more than double your share price in the next decade.
The post The Only Retail Stock I’d Consider Buying in a Recession appeared first on The Motley Fool Canada.
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Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.